Exposing the power of corporate lobbying in the EU

"Do you remember what caused the financial crisis?"

CEO’s answer to a video produced by the European called “Parliament’s way out of the financial crisis”.

First watch what is probably one of the most manipulative and propagandistic videos to come out of Brussels this year:

The video suggests that member states would have been ‘prepared’ for the crisis, had they ‘stuck to the rules’. That’s a reference to the rules that the eurozone countries have to adhere to: the stability pact and the thresholds of a 3 per cent budget deficit and a maximum debt of 60 per cent of GDP. That explanation is false. But several countries that are hit by the eurocrisis, for example Ireland and Spain, were in compliance with the stability pact, and were even regarded sound economies by the Commission until the eurocrisis broke.

The real causes of the eurozone crisis

At CEO we think there’s a more realistic explanation for the eurocrisis. It’s no coincidence that the crisis is hitting a number of eurozone countries – Greece, Ireland, Portugal, Spain – very hard. They have fallen victim to imbalances inherent in the common currency, such as stiff competition with low-wage Germany, and interest rates not adjusted to local circumstances, which in turn are conducive to speculative bubbles in the housing market and elsewhere. The imbalances were an important reason why private loans became an important driver in the economy. Once the financial crisis led to a credit crunch, they were in deep trouble.

According to the European Parliament’s version, the solution is to strengthen the Commission, which allegedly possesses the solution to the crisis. But what is the Commission’s solution? Austerity. Cuts in pensions, salaries, and social benefits. Not a formula that will help us out of the crisis, and certainly not a step towards social justice.

Besides, what would a stronger Commission mean in terms of transparency and accountability? It would mean more policy making behind closed doors, which would be impossible for the wider public to influence. Which is why this solution is very popular with business lobby organisations such as BusinessEurope and the European Roundtable of Industrialists. This way, democratic debate can be limited when cuts are made and big business’ interests put at the forefront.

The EU's answer to the crisis

At the moment the Council and the Parliament are negotiating to agree on six separate pieces of legislation on ‘economic governance’. Taken together they amount to a major attack on social rights and they will also take EU policies into sensitive economic policy areas, introducing technocratic procedures to vital issues, which have until now been considered the domain of national governments and parliaments. Among the proposals are:

To strengthen the stability pact by making it easier to penalize countries which don’t abide by the criteria on debt and deficit

To introduce stronger controls on member state budgets to make them ‘stick to the rules’

To introduce rules on the lowering of member states debt

To establish a new mechanism to deal with ‘macroeconomic imbalances’ and to set threshold levels that, if crossed by a eurozone country – will lead to a fine.

Parliament and Commission united behind bad proposals

The idea behind most of this is that EU countries should implement austerity as a way out of the crisis. This formula could prove fatal, not only for the immediate victims, but for the economy as a whole. Deflation could ensue.

As for the proposals on the stability pact, they are vigorously supported by the right wing majority in the European Parliament, and opposed by the Social Democrats, the Greens and the left wing GUE-NGL group.

On macroeconomic imbalances, however, the Social Democrats and the Greens are supportive. They are hopeful that the new mechanism will be used to correct particular imbalances, but at the same time, they agree that it’s for the Commission to define what kind of imbalances should be measured, and what kind of remedies should be demanded of member states. In fact, the Greens even support the idea that when proposed sanctions for a member state are to be voted on, it is to be done by ‘reverse majority’ – which means that a qualified majority has to object if a fine is not to be imposed.

In this way, a majority in the European Parliament is putting all its faith in the Commission. The very Commission that has pledged to use the new mechanism to enforce austerity measures and to attack social rights.

Not the last word

The proposals on economic governance have been widely disputed. Not least, the trade union movement have condemned them. There is a chance the proposals will be adopted after the summer break, but that will hardly be the end of the controversy. Once the proposals will be implemented, they are bound to meet with widespread public resistance. When that time comes, alternative proposals on how to deal with the eurocrisis will probably have a better chance.

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NGOs have today responded to the Commission's reply to the European Ombudsman's recommendations on how to better handle revolving door cases within the Commission. In particular, they echo the demand for more transparency.

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Corporate Europe Observatory welcomes the announcement by European Commission first vice-president Frans Timmermans today after a college discussion on Commission president Juncker’s Transparency Initiative. It appears that earlier announced transparency obligations on commissioners to publish details of meetings with lobbyists, are now extended to also cover staff in cabinets and directors-general. This is an important step forward in providing greater transparency around the role of lobbying in EU decision-making, but further steps are needed.

Now that the dust has settled on the hearings of the commissioners-designate in the European Parliament, it is time for some critical reflections on the messy, partisan and in several other ways fundamentally flawed process for appointing arguably the most powerful people in the whole EU infrastructure.

There are daily meetings between the financial lobby and the Commission, and they’re mainly about issues crucial to society at large. Despite this, the public is only able to access piecemeal information on what is discussed, and even then with unacceptable delays. Given the huge impact the financial sector has had on society, keeping this lobbying behind closed doors is deeply problematic. Transparency reform is needed.

NGOs have today responded to the Commission's reply to the European Ombudsman's recommendations on how to better handle revolving door cases within the Commission. In particular, they echo the demand for more transparency.

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Corporate Europe Observatory (CEO) is a research and campaign group working to expose and challenge the privileged access and influence enjoyed by corporations and their lobby groups in EU policy making.

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